No Such Thing as a Free Lunch

Lately I’ve been seeing a Term Life Insurance commercial guaranteeing a full refund of premiums if the insured person is still alive at the end of the policy’s term period. How can that be possible?

Well…Since absolutely nothing in life is free, the insurance company’s engineers (their Actuaries) simply calculate how many extra dollars must be added to the policy’s basic premiums, and at what rate of interest, over the policy’s term period, to equal the refund amount. ( Well yes, there’s a bit more to the calculations, but I don’t expect you to venture into the calculus weeds with me…Just take my word for it.)

Buying into any pie-in-the-sky get-your-money-back scheme is fraught with disappointment. Premiums for the “refund if you live”(RIYL) term life insurance must be significantly greater than those required to cover the policy’s guaranteed Death Benefit…so the Beneficiaries of the poor soul who dies before the end of his/her RIYL policy’s term period receive fewer insurance dollars than would have been he case if the bloated premiums had all been used to buy additional life insurance.

And…what about the buyer of RIYL insurance who decides to drop the insurance? Times and circumstances change. I’ve not read the fine print in one of the RIYL policies, but I’ll guess that getting any pro-rata refund would be a challenge or impossible….same goes for the guy/gal who dies two days before the end of their policy’s term date.

Life insurance is a hedge against dying too soon, not living too long. Before jumping into any RIYL term life insurance, talk to a professional financial advisor. Most are Fiduciaries who typically don’t charge fees for an informal conversation with you, and even if they did, it would be money well spent. Look for letters like CLU, ChFC, CFP, CPA, on their business card. Such professionals are valuable resources for you.

Carpe Diem

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Aging Into Medicare and need help with the details?

Aging into Medicare is unsettling at best and most would appreciate having someone to help them navigate through the fog surrounding it.

Here are a few words to get you started:

Go online to, www.medicare.gov, Medicare’s online presence, to discover everything you’ve wanted to know but were afraid to ask about Medicare… A website which is easy to navigate for us non-geek computer users. It’s all there for you….tells you the who, what, where, when and how regarding Medicare.

Assuming you are closing in on Age 65, you may complete your Medicare Enrollment as early as three (3) months prior to your age 65 Birthday Month. (Your Medicare enrollment would go into effect on the first day of your age 65 birthday month…with a couple of exceptions.)

If you are covered by Group Health Insurance and intend to continue working past age 65, have a talk with whoever administers your company’s group health insurance. It is generally best to enroll in Medicare Part A, only, while continuing your group health insurance coverage. (See Medicare.gov for the details.)

I just mentioned Medicare Part A, so what is that? Original Medicare Part A provides benefits for hospital, skilled nursing facilities, blood transfusions and hospice care. Part B of Medicare provides “outpatient” healthcare benefits …healthcare treatments needed when not an admitted patient in a hospital….other than outpatient prescription drugs.

Original Medicare did not provide outpatient Rx benefits. However, several years ago, an outpatient Rx benefit was added to Medicare, and designated as Medicare Part D.

Is there a Medicare Part C? Yes there is. It came along in the 1990’s and is referred to as “Medicare Advantage”. Essentially, under Part C of Medicare a Medicare Beneficiary may contract with a qualified health insurance company to provide his/her Medicare Benefits. (Find more about Medicare Advantage at www.medicare.gov.)

Broken down into its parts Medicare begins to come into better focus.

If you live in Florida and want to get a better handle on Medicare, send me an e-mail at, ksmith@kensmithinsurance .com

Carpe Diem

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September was Life Insurance Month…Better Jump on that NOW

Life insurance premiums may increase soon…Some have gone up already. What’s going on?

Over the past century life insurance premiums steadily decreased in the USA as our life expectancies increased and ownership of life insurance policies continued to grow year over year. Add in favorable returns on life insurance companies’ investment portfolios, lower administrative costs resulting from replacing clerical tasks with software programs, the “law of large numbers” plus a couple other factors to make ownership of life insurance affordable to Jane and Joe Average.

Today, the ownership of life insurance curve has flattened ( a subject for another day…perhaps a fleeing from responsibility by our under forties?)

Life Insurance companies rely on returns from their investment portfolios to create the cash to pay death benefits, and those returns are less today due to government restrictions on what, where and how much of their portfolio may be directed. For instance, only a small percentage may be invested in equities (common stock), so they have not been able to take advantage of the recent stock market run up….Needing safe, long term investment havens, large amounts may be directed to highly rated bonds or packages of residential mortgage loans, returns on which are a fraction of what the were only a few years ago.

So how do they make up the difference?… Obviously, raise the price of the product. Get ready. It’s coming.

Be proactive. Call your Life Insurance Agent now to lock up today’s most affordable life insurance premiums.

Carp Diem

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Buy Yourself Some Peace of Mind

Imagine having the peace of mind provided by not having to worry about what happens to your spouse and/or kids if something bad happens to you today…severe injury from an automobile accident, a slip and fall at home in the kitchen, falling victim to an illness from which you don’t recover….Life is a minefield and getting across it safely isn’t always an option.

Whether preparing for a weekend visit to grandma’s house or getting ready for that seven night cruise to Aruba, you would think ahead about what to pack, what to do there, and a ton of other little items to assure things run smoothly during your trip….The same applies to your trip through life and, just as happens during some of those trips, life can throw you a curve ball you’re not ready to hit.

Get ahead of the game today by talking to your insurance agent about life insurance to provide a life line to support your kids and spouse when you are no longer there to secure their well being. Peace of mind will result from knowing they will be all right financially if the worst happens to you and you will be freed from that nagging worry about “What happens to them if…”.

Adding life insurance to your family’s other assets can make a difference between just scraping by or sailing through with some room to spare. Unlike most of your family’s other assets, life insurance death benefits are income tax free* to your spouse and kids.

Carpe Diem

* Unless you have unpaid income taxes

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This Too Shall Pass

Corona Virus, Covid19…wouldn’t you love to have a dollar for every time you have seen, heard or read those words!

Over the past two decades we have been challenged by: HIV/AIDS, Pneumonic Plague, SARS, Avian Flu, Dengue Fever, H1N1(Swine Flu), Cholera, MERS, Ebola, Measles, Zika, and then another rash of measles…and, starting in late 2019…Covid 19.

It certainly appears that Mother Nature stays busy thinning the herd; however, the world’s population continues to grow and after each germ, virus, bug and mosquito epidemic we seem to bounce back and thrive.

If the saying, “What doesn’t kill us makes us stronger”, is correct we should come out of our current mess much stronger indeed…and maybe in-fact.

Of the things which Americans project, can-do rather than make-do, stand out. Some poo-poo “American Exceptionalism” as simply chest thumping, but if it is only chest thumping why has this representative republic become the world’s dominant economic leader less than three hundred years following its founding? That’s an argument to have on another day. Today we must concentrate on hitting the comeback trail.

Back in the 1930″s great depression FDR warned this country that what it had to fear was fear itself…concentrate on fixing the problem rather than becoming frozen by fear of what might happen. Today’s version is, “Prepare. Don’t Panic”.

This too shall pass…And when it does, go out and buy that Life Insurance you should have taken care of before Covid19 came to visit.

Carpe Diem

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We are Living Longer! What do we do now?

Recent survey results suggest we, as a nation, are looking forward to longer life-spans than did our parents and grand-parents. Life Insurance mortality tables now run to age 120, while estimated average ages at time of death are now around age 78. Keep in mind that “average” means many in the calculation lived well into their 90’s and above to off-set those passing away at ages much less than 78, to arrive at the current average.

Life insurance premium rates are lower today than ever before, due to our increasing lifespans. I could put you to sleep explaining how the actuaries factor that into their calculations. Just take my word for it today. (Better yet, ask your life insurance agent to give you a quote.)

The mythical “Retirement Age” of 65 is quickly fading into the sunset as more and more of us continue working far past that age…a lot of us are just getting our second wind at 65. Besides, it doesn’t make sense to spend thirty or forty years developing skills, knowledge, arts and crafts only to walk away from them at an arbitrary age designated way back in the 1930’s.

Living longer is good news, but also includes some challenges, such as the need for a reasonable income in our later years. Wives should anticipate life as a widow for ten or more years after losing their husbands. Plan for that now. (Statistics tell us widows ages 50 and older tend not to remarry.)

Ladies, do your husbands own substantial amounts of life insurance with you as their beneficiaries? What is a “substantial” amount? An example could be one million dollars then invested @5.00% return per year which would create cash flow of $50,000 per year before taxes. Can you live on that, plus Social Security benefits? (assuming SSA benefits are still around then)

Please keep in mind that the million dollars above does not have to be 100% life insurance; however, creating a million dollars in life insurance proceeds, income tax free, can be created with the stroke of a pen while building an investment fund balance of that size could take a lifetime for most of us.

Yes, one must pay premiums to cover the life insurance, but they will be a fraction of the benefits provided…and the full life insurance amount becomes payable immediately at death, whenever that happens.

Think about it, then DO SOMETHING ABOUT IT.

Carpe Diem

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Who Pays the Bills When You Can’t?

November is Disability Income Insurance Month. Who needs it? Who doesn’t!

Oh yes, that insurance everybody talks about but puts off for another day. All too often the premiums required by Disability Income Insurance policies scare off its potential buyer. Granted, it ain’t cheap, but not having it when you need it will cost you much more before the dust settles.

Expect to pay yearly premiums equal to around one and a half month’s benefit amount…unless you add a bunch of optional add-ons to your policy. So…if you set up Disability Income Insurance to provide $5,000.00 to you each month while you are laid up, expect to pay between $5,000.00 to $7,500 per year on average in premiums for it…meaning you have hedged $60,000.00 in annual benefits, income tax free, in exchange for ten to twelve percent of $60,000.00…to hold the bill collectors at bay. (Your results may vary but one and a half times a monthly benefit amount will be a conservative close estimate)

Still can’t afford it? Take a harder look. Get a quote from an agent or broker you trust. Owning Disability Income Insurance provides a ton of Peace of Mind.

Carpe Diem

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Is Your Insurance Agent or Financial Adviser a “Professional”

Career designations most of us understand, MD, CPA, DO,JD, DDS, DMD, etc., identify vetted professionals having completed advanced educational courses of study, successfully passing demanding tests and examinations, qualified for state licenses to practice, are members of their professional associations and subscribe to a rigid code of ethics.

When your health is involved you need help from a qualified professional. When you run into a legal issue you need help from a qualified professional. When you have an industrial strength tooth ache you need help from a qualified professional.

Unfortunately, when issues involve financial planning or the purchase of life insurance, too many of us fail to recognize the importance of seeking out a qualified professional for advice. If the subject is financial planning, look for designations such as CFP, CFA, ChFC, behind your resource’s name. If the subject is life insurance, look for the designation CLU or ChFC, and someimes CPA, behind your resource’s name.*

Financial planning and ownership of life insurance are elements of an estate plan, and proper estate planning means having your attorney team up with insurance and financial planning professionals to ensure the best outcome.

Only one of the professionals mentioned here typically does not charge you a fee for his/her advice: The CLU. (When the CLU provides life insurance for you, the insurance company under consideration compensates him/her for bringing the business to them and servicing it…no sale, no service fee)

A CLU (Chartered Life Underwriter) invests significant time and treasure in university level (via The American College in Bryn Mawr, PA.) study, covering law, trusts, actuarial science, economics, estate and income tax issues, to name a few, as they relate to Life Insurance, on his/her way to earning the CLU designation.

Is your life insurance agent a CLU or ChFC? If not, Why not? Buying life insurance is serious business with long term consequences. Seek out a professional when purchasing something as important as Life Insurance. It’s no brainer.

Carpe Diem

* MD Medical Doctor… CFP Certified Financial Planner
DO Doctor of Osteopathic Medicine… CFA Chartered Financial Analyst
CPA Certified Public Accountant… ChFC Chartered Financial Consultant
JD Juris Doctor (Attorney)… CLU Chartered Life Underwriter
DDS Doctor of Dental Surgery…
DMD Doctor of Medicine in Dentistry…

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Just What is “Business Insurance”?

Okay, you are about to rent office space for your new business and your new landlord insists you provide proof of business insurance in order to finalize the lease. What is it and how do you get it?

“Insurance” is a very broad term with many applications. There are life and health insurance plans providing benefits when the insured person dies, or incurs expenses resulting from illness or accidental injuries. Subsets include Disability Insurance, to replace income lost due to illness or accidental injury, plus Long Term Care Insurance to provide dollars to pay the bills for at-home or institutional care. The common thread there requires the insurance be provided to cover a living person.

Then there is insurance to cover things and events…Think planes, trains and automobiles…Mechanical things break, or someone unintentionally breaks them, creating a need for dollars to fix or replace them. Fire or weather damages or destroys a home or business, creating the need for cash now to repair or replace. That form of insurance is referred to as “Property/Casualty” insurance, or short form,”P&C Ins.”.

Insurance on residences or personal automobiles is referred to as “Personal Lines insurance”. Insurance on offices, stores and most other items needed in order to operate a business is referred to as “Commercial” lines insurance.

There is insurance to cover events and legal responsibilities such as professional liability, business errors & omissions, and similar events.

In addition to the above there are dozens of additional insurance products to cover much more than has been mentioned here.

Average small business owners, will need Commercial Insurance to cover losses created by fire and wind storm, burglary/theft, in addition the liability insurance in case someone is injured while in his/her business establishment. Get those from a qualified Commercial Property & Casualty Insurance Agent. Good ones will have affordable policy packages to fit your landlord’s requirements.

You may or may not be able to get what you need from the guy or gal who insures your home or automobile, since most of them specialize in “Personal Lines” of insurance. Instead, Google “Commercial Insurance” in your town to find a more qualified agency which specializes in serving business clients.

Carpe Diem

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Relying on a GoFundMe Page Might Not Be Your Best Option

Key character in Margaret Mitchell’s epic novel, Gone With the Wind, Scarlett O’Hara, handles difficult situations by kicking them down the road with signature line, “I’ll worry about that tomorrow”.

Not having a plan to replace your family’s lost income stream if you don’t survive an accident or illness this week is precisely, “I’ll worry about that tomorrow”.

How many times have you seen a story on local TV news about someone’s death or disabling injury, followed by: “A GoFundMe account has been set up at XYZ Bank to pay for the funeral…or hospital bills..etc.”

What is your plan? If your are financially secure, make sure your survivors have access to cash in an emergency. If you and your spouse or trusted partner have separate savings/checking accounts, consider updating them to joint accounts. Consider other ways to address financial issues now rather than ignoring them.

Today, start building a rainy day fund to cover at least six month’s family living expenses. Do it now with cash and Life and/or Disability Income Insurance…then take it off your, “I’ll do it tomorrow” list.

Carpe Diem

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